Gerhard Erasmus, tralac Associate, discusses the issue of surtaxes on SADC imports

According to recent newspaper reports the Government of Zimbabwe is increasing the levying of “surtaxes” on imported goods. This has serious implications for how the SADC Free Trade Area is supposed to function. The benefits of duty free trade among the SADC member states are undermined and the very nature of a predictable and rules-based system is jeopardized. At least one South African exporter, which manufactures washing powder, has already decided to cease exports to Zimbabwe after the introduction of a surtax of 40%. The tax was imposed at the beginning of August without prior notification. The tax is charged on the packaged product, while bulk washing powder exports do not appear to attract the tax (Business Day, 1 September 2014).

A number of important issues now arise. What exactly is a “surtax” in the context of an FTA? Are surtaxes compatible with the obligations which SADC member States have to respect? What are the implications for SADC when such practices, if unlawful, go unchecked?

The SADC Protocol on Trade defines an import duty as “any duties or charges of equivalent effect imposed on, or in connection with, the exportation of goods from any Member State to a consignee in another Member State”. These Zimbabwean surtaxes are import taxes under another name. They have been announced in terms of national legislative instruments which regulate trade across national borders and they affect imported goods. It is important to distinguish taxes (tariffs/duties) on imported goods from other domestic taxes such as value added tax (VAT). In this instance the effect is an additional tax on imported goods which has to be paid at the border.

Unless they can be justified under particular exceptions provided for in the SADC Protocol on Trade (such as the safeguard clause) these surtaxes are illegal. If they are not, the onus is on the Government in Harare to explain their true nature and to demonstrate that they are SADC compatible.

What will the affected SADC Members do? They should do what governments do elsewhere (in World Trade Organisation (WTO) disputes, for example) and step in on behalf of the affected private parties. Private entities are the real traders but do not enjoy any directly enforceable rights under international agreements. In SADC they cannot act directly against SADC Member States. Their governments of nationality should take the diplomatic and dispute settlement steps required to ensure the SADC legal regime is respected. Unfortunately our governments do not litigate against each other. And they have now also taken away the standing of private parties to approach the SADC Tribunal for relief when their rights are violated. Under the new Protocol on the Tribunal announced at the recent SAC Summit, only inter–state disputes will in future be allowed.*

These developments do not bode well for the future of SADC. They also bring serious political risks. There may come a point when illegal unilateral behaviour will become intolerable and will invite retaliation. History teaches us that the result will be a downward spiral of acrimony and the destruction of the certainty that legal regimes bring.

Tell us what you think.

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